Pensions savers who hold money in Nest pensions will no longer have their cash invested in the tobacco industry.

Nest, the largest provider of auto-enrolled workplace pensions in the UK has announced it is to divest all the money it manages for pension saver from the tobacco industry.

The firm says it currently has around £40 million of exposure to tobacco stocks. This represents about 0.7% of its total assets under management (AUM).

Nest predicts its AUM will increase in size to £20 billion by 2022. This means were it not to divest from tobacco, its relative stake would increase from £40 million to £120 million.

The provider says its decision has taken into account stricter worldwide regulation against tobacco products, aggressive legal action from governments and falling rates of smoking.

Nest adds these factors suggest tobacco is a “poor investment” for its eight million members.

Money currently invested through passive funds in tobacco stocks will be redirected to other companies in the same index.

Mark Fawcett, Nest’s chief investment officer, says: “This announcement won’t come as a surprise to some. We’ve been highlighting our specific concerns around tobacco investments and its performance for a couple of years now.

“Tobacco companies are facing legal challenges across the world from governments taking action against an industry causing serious harm to their citizens.

“The harsher regulatory environment stops tobacco companies from attracting new customers and increasing their market share of existing smokers. In our opinion, tobacco is a struggling industry which is being regulated out of existence.

“We have not taken this decision lightly, but we don’t think it makes sense to continue investing in an industry whose business model looks increasingly unsustainable.”

Nest already has a tobacco-free policy for its Ethical Social and Governance (ESG) funds. The divestment will screen out tobacco stocks from all of its retirement date funds and other choices.